Douglas Drysdale on Cybin's Psychedelic Breakthrough in Mental Health

MedicalGold:

Doug, it’s great to speak with you today and congratulations on the CYB003 phase 2 readout. Really stellar results and a real breath of fresh air!  

Doug Drysdale:

Yeah, we're really excited about it. We suspected that they would be good based on what we were seeing. We've seen an increase in potency from the deuteration of both the psilocybin analog and the DMT program. But I don't think any of us were expecting it to be that good. It's such a large and rapid change for patients, which is just tremendous. So, yeah, I'm excited about the top line data which will be coming towards the end of the year. And with two doses, we've always believed that two doses is kind of the way to go because a lot of people don't get across the line fully on the first dose. They can be somewhat resistant or they're skeptical or anxious. Lots of reasons, I imagine.

But that's sort of one two punch within a couple of weeks and then be done for 6 ,8, 12 months - whatever it is. I think that could be good.

MedicalGold:

Yeah, I definitely want to talk about CYB003 and where you're going with that. I think that's definitely the meat of this conversation. But let's maybe start with something a little less exciting. The Small Pharma transaction is closed. How important is that for you? And how does that set CYBN up to be the top company in the medical psychedelic space?

Doug Drysdale:

I think Deuterated DMT has the potential to be the gold standard. We're seeing a 40 minute experience from a single injection. So it’s very scalable. We've seen great proof of concept data from Small Pharma with non-deuterated DMT. Tremendous results. 40% remission, six months after one or two doses of regular DMT. And as I said, with the deuteration, we're seeing increased potency. So I imagine that data will only get better as we test the deuterated compound. And then if we can move away from an IV infusion pump with DMT to a small volume injectable, subcutaneous or intramuscular, that's much simpler to be dosed anywhere, then you've got a really easily administered, short acting, highly scalable asset there with a really big IP portfolio. So consolidating all of that under one roof with the acquisition of Small Pharma makes a ton of sense.

They were working on different analogs to us and so everything is very complementary. And now we have, I think, the largest IP portfolio in the sector with 33 granted patents and 170 pending patents. So all in all, I think it was very well received. I think it makes just a ton of sense and gives us a full second program, which many companies in the sector just don’t have.

MedicalGold:

So it definitely diversifies your IP and it gives you multiple avenues to get to an FDA approved drug. With the Small Pharma acquisition, how much does it increase your overall cash burn rate, if at all?

Doug Drysdale:

No, not really materially. Because of course there's a lot of synergy when it comes to public company costs. Even though they had two programs and we have two programs, we're ending up with still two programs. So it's not like we're going from two to four. So it's still the CYB003 program and a deuterated DMT program. And then they had about a dozen people in the UK, a great team. Quite honestly, it's going to be really good for us geographically as we expand our CYB003 program into Phase 3 and into Europe as well. There is lots of synergy, and not really a material increase in cash burn.

MedicalGold:

CYB004 is your deuterated DMT?

Doug Drysdale:

Yes, we've got two assets now that are deuterated, SPL028 and CYB004. We could take either one of those forward. We'll do that evaluation as we get to the end of the year here we're going to have phase one data readouts on both of those. So we'll have pharmacokinetics (PK), pharmacodynamics (PD), and dosing data. Each of us, and small pharma has been working on studies to really understand the properties of the deuterated version. And so between that and the intramuscular and the subcutaneous data, we'll have a full data set and we can pick which asset we take forward. It'll be one or the other.

MedicalGold:

With SPL026 it can be administered through IV or intramuscular (IM). You can do it either way?

Doug Drysdale:

Yes. So Small Pharma has been testing both IV and IM, and also testing both with SPLO28, which is a deuterated version. With IV infusion you need an IV infusion pump, which is a piece of equipment that needs to be programmed with a technician. And those equipment and those staff aren't in psychiatrist offices. So our goal is to try and move away from that. And we have two options that we're working on. One is an intramuscular injection, very easy to give, and the alternative would be a subcutaneous injection, a bit like an ozempic, something very simple to give there, too, with a small needle. So we'll look at the profiles of those as we get the data. Each route has its own particular unique characteristics of the PK curve.

And so we'll look at that data and figure out which one to take forward.

MedicalGold:

With the IV administration, it gives you the advantage that you can end the treatment session at basically a moment's notice. But with the IM, you would give a dose and they're kind of just on that ride for 30 minutes or so.

Doug Drysdale:

Right, that's very true. But if physicians, psychiatrists, therapists don't have that equipment to be able to dose patients, or the staff, then that's a big hurdle. It means you'd be limiting dosing of deuterated DMT to very specialist clinics. And we don't want to do that. We want to make it more widely available. Yeah, look, we're seeing a 40 minute experience or thereaboutsfrom a single injection that gets people across the line, as you say, in that DMT space, you're not coming back out of it again until the drug wears off. It's quite different from psilocybin in that respect. But we've seen lots of positive experiences and even from the non deuterated version, we've seen now the 40 minutes experience or so, just tremendous efficacy in depression.

MedicalGold:

That's exciting because I don't think that most investors are as aware of how advanced that platform is. The CYB004 and the SPL026, I don't think they're as focused on that. And obviously, especially with the news you put out on CYB003, everybody's looking at the psilocybin going to Phase 3 in 2024. But this really gives you a multi pronged approach and a lot of ways to help people and also to increase shareholder value. One thing that definitely caught my attention is you just did financing. So it looks like it's $64 million in total, but $30 million in front of it and then the rest comes later. Can you break that down a bit more?

Doug Drysdale:

Yeah, it's in a couple of tranches. The first tranche we've just closed at around 30 million USD 40 million, of course, Canadian. And then the second tranche is available as warrants get exercised at a premium to that price. So collectively now, with our cash on hand, with our at the market program, and with this financing, assuming the warrants are fully exercised with cash on hand, we have access to over C$130,000,000. So it positions us very well for this next stage that we're in.

MedicalGold:

I’m interested to know about who were some of the participants in the financing? Are there any players that you can talk about? Obviously, Point72 took that stake in September. Did they top up in this financing?

Doug Drysdale:

I'm going to have to let you wait for the filings to come out. Unfortunately, this was a small group of institutional investors. Many of them were already shareholders and the lead investor was one of our largest shareholders. So you can read into that what you will. They prefer not to be named, but of course they will file, most likely, so it'll get picked up. I can tell you one interesting investor that was in the book this time, and that was Blake Mycoskie. So Blake is the founder of Toms Shoes and a little while ago pledged $100 million to be invested in psychedelic research. And he's made a number of philanthropic donations so far and he's decided to make an investment in Cybin in this round. So that's certainly a good and interesting endorsement.

MedicalGold:

So this is interesting. The medical psychedelic space was basically completely brand new in 2020. I don't think it was well known at all. And I don't think there were more than a few public companies. Obviously that changed a lot in 2021, where we had about 30 or so companies come into the space, mostly in Canada. And as it turned out, that was a really, I guess, bad time to go to market because it was all downhill from there. We've seen some companies fall by the wayside already in the last year. We've seen some companies get snapped up, as you did with small pharma. So there's been a bit of a consolidation in the space and sort of a right sizing.

And one of the themes that we've been following for the last year is that basically we're going to have a handful of companies lead the sector and the rest of them are probably going to be gone just because that's how it's going to work. And investors are not going to give more capital to companies that are not at the forefront of the sector. At this point in time, I think we can clearly say that Cybin is one of the companies at the forefront of the sector, and arguably after the CYB003 phase 2 data, the leading company in the sector. Who are the investors that are most intrigued in the space right now? Can you talk about any of the institutions or even private investors that really are backing the space right now?

Doug Drysdale:

First of all, let me say your comment about consolidation is spot on. This economic cycle we've been through, and the biotech downturn we've been through, has probably sped that up a bit. It was an inevitable consolidation, and it's no coincidence that all of the main companies that are doing good work and thriving, they're all US listed. That gives them access to higher trading volume, and a higher quality of investors. A lot of investors can't invest in some of the smaller Canadian companies, so it's no real surprise. And that was a challenge for Small Pharma as well. They had tremendous data with their assets, but they were stuck on a small exchange in Canada. So the top sort of four or five companies are all US listed.

And we're seeing now, as we've just gone through this last financing, and we’ve spoken with a lot of investors. An awful lot of very fundamental, long biotech firms, and they're all doing their work on the space. They're all very interested in the medical psychedelics space. They're getting their head around it still, largely, I would say some have stepped in, as you've seen in our transaction, but also you saw that in the recent Compass raise that they did was a good solid list of biotech investors there that give you an indication of the kind of quality of investors that are now looking at this space. So I think we're on the verge now of getting really meaningful data, this phase two data that we're looking forward to sharing at the end of the year.

We're very excited about the concept of being able to increase response and remission rates by giving a second dose about three weeks later. We've also tested a higher dose in the last cohort of the study, higher than the data we just published. So there's some more to come, and we're measuring it out to six weeks in that data. So interesting data is coming. And then the more we get data like that of high quality companies, and as they complete phase two and get some Phase 3 readouts, you're going to see more and more of these large biotech strategic investors getting involved, and I think you'll see Big Pharma get involved as programs become de-risked like that.

MedicalGold:

I'm not going to try to nail you down on a market timing call, but I am interested in your thoughts aon where the sector is right now in terms of the longer term cycle. Let's say Cybin, Compass, MindMed, and maybe a couple others. There's basically a handful of companies that are at the top of the pack and setting themselves apart as the leading companies. How big is the opportunity here for investors? We can all see the charts of the various stocks, and see how bad the performances have been in the last couple years. But sometimes when you're down 90%, it can also be the point of the greatest opportunity.

How big is the opportunity here and how excited are you as the CEO of Cybin going into 2024?

Doug Drysdale:

We're on the verge of a whole bunch of data catalysts. From reading out this full phase two on the psilocybin asset, we've got these two, phase one readouts for deuterated DMT. We're looking to start a Phase 3 program by the end of quarter one of next year. So we're really ramping up. I think the opportunity is enormous. I think the market value and the potential for just depression and anxiety is around $40 billion annually. And we have a market cap of little under $200 million. That doesn't make a lot of sense when you think about it.

Our data where we showed with CYB003, the benefits of adding it on top of an SSRI, which means the placebo group were on SSRIs as well, so we were trying to add on top of background treatment, which is harder than giving monotherapy. The last drug that had decent data doing as an adjunct in depression was Abilify Aripiprazole, and that had peak sales annually of approximately $7 billion. So if you think you've got two assets with that kind of potential, a $200 million market cap doesn't make much sense. And then when you add in other potential future indications, alcohol use disorder, opioid use disorder, postpartum depression, eating disorders, you're looking at a market that could be north of $100 billion. So it will take off at the right time. I've definitely seen a shift in sentiment.

We had a few catalysts recently, with Point72 coming into the company with the Small Pharma acquisition. And this phase two interim data has started to get lots of attention. We're definitely on a lot more investors' radar screens than we were before. Plenty of biotech funds didn't know who we were. We were too small and we hadn't gotten data. But that's changed. And I think they're watching with a lot of interest because these treatments really have the potential to completely transform how we treat depression.

MedicalGold:

Yeah, I think you put it very well and I think that's pretty exciting, the size of this opportunity. So let's talk about CYB003, the phase two data that you published two weeks ago on Halloween. Just looking at this, reading the results, this is exceptional. And I guess my questions are, this is just one dose. You're having groundbreaking results with just one dose. So what's possible with a second dose? And is this too good to be true?

Doug Drysdale:

It's funny, we literally had some biotech investors have that kind of reaction. Is it too good to be true or it seems too good to be true? But look, it's remarkable data, no question about it. And you're right, it's one dose of twelve milligrams of CYB003 at three weeks. And when you see that kind of separation from placebo, 14 point improvement, that's really unlike anything else that is available or in development. So very exciting. We've tested a higher dose, 16 milligrams, and we'll have data at year end, and we'll also have data out to six weeks as well. So we'll get a little bit of a glimpse at durability sometime in Q1 2024. We will also have some three month data. But I think I'm most excited about the effects of a second dose.

As I said, many folks don't get across the line fully on the first dose, but the first dose can work as a really good preparation for the second dose because they know what to expect. And we saw a 53% response rate, which is very high, and we saw a 20% remission rate. So one in five of those patients in complete remission after just a single dose was remarkable. And that's with a group of patients that were on average at the severe end of the spectrum as a baseline starting point. So I don't think we're necessarily going to see an increase in efficacy in terms of points change from baseline because we're at this 14 point level already. It's possible, but we don't need it. But I'm hoping that we might see an increase in response rates and remission rates.

Imagine if we can get that remission rate up to 50, 60%, something like that, with a second dose. Then you've got an amazing treatment for depression. Two doses and most patients are in remission. It would be great.

MedicalGold:

Yeah. I mean, 50% remission rate would be absolutely extraordinary. That's a Grand Slam home run game changer for public health, game changer for CYBN shareholders. Yeah. Now I guess one question I had, this is a funny question because again, is it too good to be true? Let's say two doses gives these great results to a good percentage of the population. The pharma model is to give somebody three Xanax pills a day or three SSRIs a day or what have you, and they have to take 1000 pills a year to maintain some baseline health. Right? So if you're able to cure people essentially with two doses, what are the economics like? What are they going to be? How much per treatment do you think this is going to cost?

I'm just wondering because obviously pharma basically hooks people on pills they have to take and they have massive side effects if they try to taper off them. This is something totally different.

Doug Drysdale:

When you think about the stats around depression. One in five people have experienced depression annually, but in their lifetimes, one in two people experience a depressive episode. And that says to me that depression can come and go. You could be depressed, you could get over it, or you could get treated, maybe come off your medication, and at some point in the future there's a possibility you might relapse. Also, there's 22 million adults in the US with depression. So it's a big market. Before we start to run out of opportunities, I don't know whether it'll be two and done, or whether it's two every six months or two every twelve months. But that model can work. We've seen that more and more in pharma, actually.

You think about some of the autoimmune treatments where people are taking, say, a quarterly injection or something like that. We've even seen some gene therapies at the extreme end of the spectrum. Gene therapies where it's one and done for life for congenital treatment. So I think the model can work and it's a very large opportunity. And of course, beyond depression is all those other indications we talked about as well. I think we're a long way from running out of patients.

MedicalGold:

It’s clearly an enormous opportunity. Then you think about the entire world. It's not small. So let's just nail down what shareholders can expect from CYBN over the coming months. What is the timeline you're seeing for CYB003? And you're launching into Phase 3 in early 2024, is that correct?

Doug Drysdale:

So for CYB003, we'll have all of this top line phase two data out to six weeks, all of that gathered and analyzed by year end. We plan to submit it at that point to the FDA and request an end of phase two meeting. So after that we'll meet with them, likely mid quarter one, and agree to Phase 3 study design. That's largely the purpose of that meeting. And we're ramping up GMP manufacturing of our capsules for the study. We've already started recruiting investigators and sites for the Phase 3 study. So I expect that we'll be in a position to start recruiting patients into that Phase 3 depression study by the end of quarter one. And then with deuterated DMT program. As I mentioned, we have two phase one readouts around year end as well.

That'll help us decide which asset we're taking to the next stage. And the plan is for a US phase two proof of concept study with deuterated DMT beginning in the first quarter. That'll be in generalized anxiety disorder. And the goal there is to start to access that market. Anxiety disorders affect 18% of the population. It's the largest mental health market, actually, because it's made up of a lot of different anxiety disorders. So that's a great program to kick off. And of course, we already have phase two data in MDD with non deuterated DMT, and there's a 70-80% overlap with GAD. So we have a lot of confidence in being successful. And then a couple of other small readouts we'll have as we get through the year.

We'll have intramuscular and subcutaneous data on the deuterated DMT program as well, which we're working hard on those in order to try and make that asset really competitive.

MedicalGold:

So you have four trials coming in 2024. One phase 3, and one phase 2?

Doug Drysdale:

One phase 3, one phase 2, and then two formulation studies.

MedicalGold:

Got it, so just thinking about the dollars and cents here, CYBN is about a $110,000,000 market cap company right now. I’m guessing phase 3 is going to cost about $30 million in total. The other trials, all four simultaneously, will probably cost about $50 million. How does a company of your size handle that kind of spend?

Doug Drysdale:

Yeah, so, based on the raise we just did and shares outstanding, we're actually at about US$180 million market cap. So definitely a little bigger. And as I said, between this raise and access through the ATM and cash on hand, we have just a little under 140,000,000 Canadian that we have available to us. The spend numbers you pointed out are pretty close. About $30 million for Phase 3. The phase two is probably in the $6-$7 million range, and the formulation studies are significantly less than that single digits, but that's over a period of years. So the Phase 3 study is roughly 18 to 24 months, and the others would be completed in about a year.

So, I think between what we have now and as we see more catalysts coming with the right market conditions, I don't see us having an issue raising what we need. Even during the last two years, when the market has been pretty awful, we've been able to raise capital, and we're in a stronger position now than I think we've ever been with the data we have coming down the road.

MedicalGold:

Final question. Is there any contemplation of a partnership with a large pharmaceutical company to sort of help to finance these trials? Is that something that you're even thinking about, or is it even a possibility?

Doug Drysdale:

Yeah, we've had a large number of conversations with some very big pharma companies. Pretty much all of the companies that have CNS or psychiatry divisions globally, so not just in the US. And there's a lot of interest. They're doing their work. They know the IP landscape inside out, they know the chemistry inside out. They know all the players. And at some point, I think things will align and they'll have a view of the IP, the data, the opportunity for them to pull the trigger. I think it's inevitable that you'll see Big pharma in this space. Given the size of the opportunity, they couldn't afford not to be in the space. I mean, there's really not been a lot of innovation in psychiatry for 40 years or so.

So this has been the biggest opportunity in 40 years in this sector, so that they'll definitely step up. It's just a matter of when. I think for us, we'd be open to partnerships, of course, with the right partner at the right time. Right. We tend not to have a Plan B because it takes away your focus from Plan A. So we're very much focused on going it alone, especially in the US, it's quite a homogeneous market. Me and other members of the team have experience building salesforces in CNS disorders, so I've built commercial organizations. So we definitely can do it in the US. I think outside the US, particularly, say, in Europe and Asia, it's not likely that we would go completely alone. A local partner there that knows the Asian markets or has a strong presence on the ground in 26, 27 countries in Europe, where there's a lot of complexity, it just makes more sense for us to partner, at least overseas.

MedicalGold:

What do you think is the larger catalyst for the sector, the FDA approval of MDMA in 2024 or the first big pharma company taking a stake in a medical psychedelics company?

Doug Drysdale:

Oh, I think a big pharma partnership would bring huge validation and raise all ships. I think. No question about that. I think the FDA acceptance of MAPS NDA for MDMA would be a nice catalyst. It'll be kind of a good checkbox that there aren't any sort of high level regulatory issues. I don't think anyone's expecting that there should because the FDA has been pretty industry friendly so far. I think the guidance, draft guidance they put out, I say was quite friendly and no real showstoppers there, but I think everyone's waiting for that box check with the MDMA NDA.

MedicalGold:

Doug, it’s been a fantastic conversation. CYBN is doing some very important work and we appreciate your time. We look forward to further updates from CYBN over the coming months.

Disclosure

Author owns shares of Cybin Inc. at the time of publishing and may choose to buy or sell at any time without notice